1. In France and Germany, it is difficult for a household to increase its borrowing based on an increase in the market value of the house. In addition, large down-payments (as a percentage of the house price) are required for house purchases. a. On the basis of this information, how would you expect a rise in house prices in France or Germany to affect spending by households? b. In the US or UK, loans are more easily available based on a rise in home equity and only a small down- payment is required. How would you expect your answer to question 1 to change when considering the US or UK? c. What do you conclude about the role of the financial accelerator in France and Germany compared with the UK and the US?

1. In France and Germany, it is difficult for a household to increase its borrowing based on an increase in the market value of the house. In addition, large down-payments (as a percentage of the house price) are required for house purchases. a. On the basis of this information, how would you expect a rise in house prices in France or Germany to affect spending by households? b. In the US or UK, loans are more easily available based on a rise in home equity and only a small down- payment is required. How would you expect your answer to question 1 to change when considering the US or UK? c. What do you conclude about the role of the financial accelerator in France and Germany compared with the UK and the US?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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